FIFA Goes Down Swinging

Everyone knows that major sporting events have two main revenue streams: ticket sales and television broadcast rights.

(Obviously there are others, such as souvenir sales, "official product" licensing and corporate sponsorships but those are either relatively small or the monies involved are difficult to divert due to the corporate paper trail so we'll leave them aside)

Profiting from ticket sales is a relatively simple matter: you put a price on it and someone hands over the money. Likewise, making illicit profits on ticket sales is relatively simple as well: use your position to grab high-demand tickets either for free or at face value, raise the price by packaging them with overpriced hotel and airfare charges, them sit back and watch the money roll in.

Theoretically, selling television rights is a simple matter as well: broadcasters from various countries and regions around the world pay you for the right to put your event on their networks. But of course with FIFA, it's not that simple.

Back in the 1970's, Horst Dassler of adidas saw the profit potential of the coming explosion of TV money worldwide. He founded International Sport and Leisure (ISL) which, over the next 25 years or so, attained the rights to virtually every significant world sporting event, including the Olympics and the FIFA World Cup.

Along with Coca-Cola and some other hugely influential corporations and indivisuals, Dassler for all intents and purposes controlled world sport. Juan Antonio Samaranch, President of the IOC and Joao Havelange, President of FIFA, along with Dassler, basically invented modern sports rights marketing to both big business (Coca-Cola was a particularly willing and eager partner) and television rights marketing.

(ISL Executive Jean-Marie Weber is widely believed to be the source of the cash-filled envelopes which appeared under the doors of FIFA delegates the night before Sepp Blatter's election to the Presiedency of FIFA. Reportedly the deal was US$50,000 up front and another US$50,000 after Blatter got elected.)

After Dassler died and as the last century came to a close, other companies began trying to get involved in the rights marketing business. As the competition became more intense, ISL was forced to shell out larger and larger rights fees (as well as "commissions to sports executives) in order to keep control of their business.

By 2000, ISL was in serious trouble and so was FIFA. They had already sold the rights to the FIFA World Cups in 2002 and 2006, but as ISL started sinking Blatter had to try and keep them afloat, mostly because the companies who felt they already owned the TV rights to the next two World Cups weren't going to want to turn around and pay again, but that money was all gone.

So FIFA pumped money into ISL. Nevertheless, in 2001, ISL was forced to declare bankruptcy in Zug, Switzerland, and Blatter was left holding the bag. In a private letter later published by Agence France Presse, Blatter admitted to FIFA Executives that FIFA had lost $300 million.

FIFA was broke, Blatter's money men were in bankruptcy, and it looked like the jig was up.

Then it got really bad.

(I apologize for the serial-episodic nature of this thing. It's long, it's involved and I can't write a 40,000 word blog post. Sorry)